The Forgotten Pillar - Fiqh of Zakat

Raising the Forgotten Pillar

Zakat is the third pillar of Islam and as the word pillar denotes, it is a key aspect of one's faith. Allah associated Zakat with the compulsory prayers twenty-seven times in the Qur'an by saying, "Establish the prayer and give Zakat", and is therefore one of the most emphasised acts of worship.

The institution of Zakat was fully prescribed in the second Hijri year when the Muslims were beginning to blossom as a united community in Madinah. It played a crucial role in assisting those in society who suffered from poverty and were unable to meet their essential needs as they now became eligible for financial support from fellow citizens.

The order to pay Zakat is from Allah, the Mighty, the Wise. Therefore acquiring knowledge of Zakat and implementing it are at the core of Islamic belief and practice.

The Institution of Zakat

Zakat occupies an important position in Islamic law and the Islamic social system. It is not given as a favour nor as a gift but is rather as a duty where the amount is calculated in accordance with divine instruction. It is a major Islamic duty either given by the individual or collected by the state in order to fulfill a particular social service. The one who gives it does not hold favour for doing so, and the beneficiary does not have to beg for it; the Islamic social system could never be based on begging.

...the Islamic social system could never be based on begging.

The institution of Zakat works to fulfill the basic needs of the Muslim community. It strikes a balance between the economics of socialism and its call for equal distribution, and that of capitalism and how it concentrates wealth into the hands of the elite.

Zakat is not simply regarded as a tax, it is an act of worship which may be described as financial worship. Failure to properly discharge the obligation is a sin that incurs Allah's wrath and is a cause for the loss of divine protection over one's assets. It is also regarded as a factor that may justify punishment in the afterlife.

For Muslims, this is part of the belief system that denies absolute capital accumulation in the portfolios of those at the pinnacle of economic life. Rejecting the order of Zakat was equated by the first Caliph, Abu Bakr, to be a violation that sanctioned the waging of war against those who either denied it or refrained from giving it.

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‘O ye who believe! many of the rabbis and monks devour people's property under false pretences and bar people from access to the Way of Allah. As for those who hoard up gold and silver and do not spend it in the Way of Allah, give them the news of a painful punishment- on the Day it is heated up in the fire of Hell and their foreheads, sides and backs are branded with it: ‘This is what you hoarded for yourselves, so taste what you were hoarding!'

Al-Tawbah 9:34-35
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Those who are miserly with the bounty Allah has given them should not suppose that that is better for them. No indeed, it is worse for them! What they were meanly with will be hung around their necks on the Day of Rising. Allah is the inheritor of the heavens and the earth and Allah is aware of what you do.

Aal ‘Imraan 3:180
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Great Wisdom

"Take Zakah from their wealth to purify and cleanse them"-

Surah at-Tawba v.103

Islam builds its community out of human obligations towards each other, making each Muslim accountable for the wellbeing of every other Muslim. This concept of reciprocal social obligation is calledtakâful, meaning mutual responsibility, and is strongly bolstered by the fact that the Zakat is an obligatory act of worship. The tenet of mutual responsibility helps Muslims envision their society like an extended family.

On the contrary, individualism and capitalism marginalises this, where the greater focus lies on encouraging self-interest so that an individual strives to become as wealthy and financially successful as possible. Moreover, the Islamic system of Zakat was the first form of social security known to mankind. In fact, the concept of social security was only introduced in the West in 1941- nearly 1400 years later. It came with complete provisions for the poor and needy, which was organised andimplemented by the state as well asfinanced by a tax imposed only on the rich.

If the rich were to adhere to the concept of Zakat, absolute poverty would seize to exist and global poverty would be greatly reduced, and undeniably, due to the good conduct of man, Allah would place barakah in the nation's wealth, thus removing poverty. When Allah places barakah in a matter it increases in its capacity and outcome.

The Muslims witnessed such an era during the reign of Umar bin Abdul-Aziz, so much in fact that the Zakat collected was said to have been used to sponsor those who needed financial help in getting married, as the number of poor people willing to accept Zakat had diminished. It is unfortunate that this notion of divine blessing is often neglected in contemporary discourses on Islamic finance.

Point of Wisdom

Zakah literally refers to an "increase" & can also signify purification. Therefore, while the discharge of Zakah is an apparent loss of capital, spiritually it is a means for further blessings and increase in ones wealth.

Defining Zakat

Point of Wisdom

Full Ownership is a condition without which Zakat would not be due. It essentially means that an owned item belongs exclusively to the owner. He may make use of it without needing authorization from another person, nor does anyone else have a share in it. For instance, if someone ordered merchandise over the internet that was not yet received, nor was payment taken, Zakat would not be obliged on these goods until he had taken possession. Likewise, if someone was in receipt of a cheque worth a million pounds, he would only owe Zakat when the cheque is cashed in and credited into the account.

Mastering Zakat: a diagram

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Defining Zakat

"Take from their rich & give to their poor"-

Related from the Prophet (SAW)

Beyond the recipients of Zakat, Muslims are to assist each other with Sadaqah

Point of Wisdom

Zakat as known in the Shari'a is sometimes called ‘Sadaqah' in the Qur'an & Sunnah, to the extent that the famous jurist al-Mawardi (450AH) said, "Sadaqah is Zakat, and Zakat is Sadaqah". Hence in many instances they are two names for the same thing.

In the Shari'a the word Zakat refers to the determined share of wealth prescribed by Allah to be distributed among the categories of those entitled to receive it.

From this definition we can see that Zakat revolves around four matters:

1. The types of people upon whom Zakat is obligatory

This relates to individuals that have full ownership and possession over certain items of wealth for an entire lunar year, and whose value exceeds a set threshold.

2. The types of wealth upon which Zakat is obligatory and its quantity

Not all items of wealth are zakatable. The Shari'a has outlined certain categories of wealth that are subject to Zakat such as: gold and silver, livestock, minerals, etc. It also explained how much of these material assets one needs in order for it to be subject to Zakat.

3. The amount obliged to pay

This relates to the actual amount of wealth that needs to be distributed amongst the recipients from each item of wealth.

4. The recipients of Zakat

The Qur'an specifies the categories of Zakat recipients and mentions eight types of recipients. Where need arises beyond these set categories, the Muslim community are enjoined to financially assist through Sadaqah.

To summarise, like all acts of worship, there are certain conditions which qualify a person with the obligation of Zakat. Essentially a Muslim is obliged to pay Zakat when he has had full ownership of certain assets whose net amount is equal to or above the specified Nisab, base amount, for an entire lunar year.

Zakatable Wealth

What wealth is subject to Zakat?

The Qur'an does not define the various kinds of wealth on which Zakat should be paid nor does it provide the required percentages; this was left to the directives of the Prophet (SAW).

In general, it is acquired material assets that are subject to Zakat, and not services. However, even in the case of material assets, the Prophet (SAW) did not oblige Zakat on assets which are obtained for personal use. And so, a person's home is not subject to Zakat, nor is his car, or personal property like clothes.

Cash

According to the overwhelming majority of jurists, modern day forms of cash, follow the same legal rulings as gold and silver; this making it subject toZakat as well as the rulings if usury.

As paper money is at the core of modern day financial activities and the world's economy, special attention should be given to them.

Once a person owns and maintains ownership over a certain amount of cash for a set period, he must give away a portion of it in Zakat.

Trading Inventory

Trading inventory is that which is held for the purpose of sale and may include any such items as clothes in a shop, animals at market, or land up for sale. The criteria used to define trade inventory is the initiation of the sale of that item, according to the customary procedure. As soon as one intends to sell the item and begins the customary procedure, it is subject to Zakat if a full-year elapses and the value of these items, along with your other cash, has reached the threshold, Nisab.

Trade inventory is to be distinguished from capital stock, which is held for the purpose of generating a yield in a given commercial endeavour. Capital stock may include machinery used in the factory for production, clothes for employees, animals for milking, or land for growing crops, and it should therefore be noted that the nature of use determines the classification of the asset.

Generally, stock held for trading is zakatable based on the verse "O you who believe! Spend of the good things which you have earned", whilst capital stock is not for the purpose of trading.

Therefore, stock held for the purpose of selling is liable for Zakat - if it, along with other cash assets, reaches the Nisab of silver and remains on the market for a complete year, hawl.

Personal Jewelry

The Hanafi scholars, along with one of the opinions of Imam Ahmad, are of the view that it is an obligation to discharge Zakat on the market value of any gold and silver jewelry; excluding the value of any diamonds or other precious stones.

The term hawl is a fundamental part of the Zakat calculation, and it refers to the passing of one lunar year from the time a person reaches the zakatable threshold, Nisab. The general rule is that Zakat is obligatory on assets which have been owned for one lunar year; with the Zakat year beginning when a

person first becomes the owner of an amount of wealth equal to or greater than the Nisab for that particular asset. Hence, the two conditions work in tandem: if one had savings equal to the Nisab and maintained that amount for a complete lunar year, Zakat would then be due at the end of the year.

The common types of wealth on which Zakat is payable are monetary savings and business commodities. However, many other assets can be included within these two types such as dividends from stocks and shares, returns on investments, and gifts.

With a constant influx of money being credited and debited in one's account throughout the year, keeping track of the Nisab level can be problematic. In such cases of uncertainty, it is advised to stay on the side of caution and only take into account the value of one's zakatable assets at the beginning and at the end of thehawl. If both values were above the Nisab and did not fall below it for most of year thenZakat would be due.

Reaching Nisab

Establishing the obligation of Zakat

Islam does not impose Zakat on all amounts of material or monetary wealth. There is a minimum threshold required before wealth is subject to Zakat, which the jurists have termed: Nisab. For instance, the Prophet (SAW) exempted Zakat if a farmer owned less than five camels, or forty sheep, or less harvested less than five ‘Wasqs', which is a traditionally used measure; of grain, fruit or agricultural crops. And he also stated that there was no Zakat due on less than two hundred silver dirhams.

The rationale behind this condition is very clear. Zakat is due on the rich to relieve the poor and to share in the expenses of common interest to Islam and the Muslims. It can only be taken from those who can afford it.

Historically speaking, the medium of exchange in the time of the Prophet (SAW) was gold and silver coins; the dinar and dirham respectively.

As gold and silver are no longer used as currency and paper money does not represent fixed weights of precious metal, it has become necessary to evaluate the Nisab of gold and silver in terms of the specific currency by which the zakatable assets are valued today.

The Prophet (SAW) spoke of silver and gold as each having a Nisab. In today's terms that would mean that paper currency can either be subject to the Nisab of silver or gold. The contemporary Hanafi school prefers using the Nisab of silver to establish the obligation of Zakat. This is because silver is cheaper than gold and thus gives a lower Nisab value, making more people obliged to pay Zakat. This in turn would allow a greater flow of Zakat to the poor.

Calculating the Nisab

Originally, the Zakat on gold and silver was paid as a percentage of the gold or silver itself at the rate of 2.5% as they were the currency at that time. Therefore, if a person had kept a thousand gold coins (dinâr) in savings for a year, he would simply pay 25 gold coins as Zakat at the end of that year; with each coin weighing one gram.

Today, fiat money, whether it is dollars or riyals or pounds or otherwise, has replaced gold and silver as the market currency. Therefore, the present market value of the gold or silver at the time of paying Zakat should be used to determine whether or not one has reached the Nisab and is obliged to pay Zakat.

It is well known that there is a noticeable disparity between the value for gold and that of silver in our times. The best and most conservative for the Zakat recipients is to assess how much money one has had in their possession for a complete lunar year and if that amount reaches the Nisab of silver or more. If it does, he should multiply his total monetary assets by 2.5% to calculate the Zakat due.

The Nisab figure can be calculated at the time by finding the market value of 1g of silver and multiplying it by 595, as 595g of silver is the Nisab figure set by the Prophet (SAW)

Zakat on Shares

Shares represent stakes in companies that are engaged in various commercial activities and so represent ownership of a certain part of the capital of a corporation. Shares can also be bought simply for the purpose of trading in exchange markets, like other commodities in their respective markets; and as such would be looked at as trading inventory. Thus, when calculating the amount of Zakat due on the shares, the intention of the investor plays an integral role.

The common misconception regarding shares of a corporation is that no Zakat is due upon them. Whilst others believe that Zakat is due on all such shares unequivocally, and this too is incorrect. The correct method is to distinguish between shares by examining the nature of economic activity of the company itself and the intention of the owner in acquiring the shares. This is because shares of purely industrial corporations that do not practice any trade activities, such as companies who provide storage, hotels, marketing consultancies, public transport, and airline industries, are not zakatable, since the capital of these corporations and the shares which represent it are invested in machinery, offices, and buildings, that Zakat is not due on. However, the dividends distributed on these shares are added to the other monetary assets of the shareholders and are subject to Zakat at the end of the hawl.

Trading corporations that deal only with purchase and sale of commodities, such as import/export dealers and retailers, along with corporations that have a mixture of trading and industry, such as oil companies that transform raw materials and sell the final products, are zakatable as far as their shares are concerned, to the extent of their trading capacity. Thus the criteria for zakatability of shares is whether the corporation is trading or not.

The reason why a differentiation is made between industrial and trading corporation is due to the underlying principle that factories, machinery, buildings for exploitation and non-trading exploitable assets, are not subject to Zakat; with there being a consensus on this point amongst jurists. This means that people who own different shares, even of the same value, may be charged Zakat differently according to whether these shares happen to be of a trading or industrial corporation.

Where shares are bought for re-trading or held in portfolios managed by external managers who engage in
frequent market trading, Zakat should be given on the full market value of the portfolio on the day that is designated as the annual Zakat calculation. This is on the basis that the shares held in such a manner represent a form of trading inventory.

In either case, the dividends acquired from ones shares portfolio are added to the total assets and thus are always included in the annual Zakat calculation.

Zakat on Businesses

The basic principle is that everything that is prepared for sale is subject to Zakat, and all fixed assets that are used to conduct the business are not subject to Zakat.

Hence, there is no Zakat on the actual shop, factory or outlet used for business themselves; nor is there any Zakat on the furnishings, machines, or equipment, no matter how much they are worth. Only items that have been prepared for sale are subject to Zakat and these are considered as trading inventory.

The way in which the Zakat on trading inventory is worked out is by calculating the market value of the entire stock holding on a yearly basis, regardless of whether this price is equal to the price paid for them or it is more or less. Then, Zakat should be paid at the rate of 2.5%.

Fixed Assets VS Trading Inventory

Which items are subject to Zakat?

Click on a picture to find out the answer

Zakat is due on trading inventory and so all the merchandise on sale are subject to Zakat

Zakat is not due on fixed assets such as the office furnishings and equipment.

Zakat is not due on the fixed assets such as the machinery in a factory

According to some jurists, Zakat would only be due when the cheque is cashed in; and not simply being in possession of it.

If the business is one of wholesale, it should base the Zakat calculation on the wholesale price of its goods, and if it is a retail company, it should base the Zakat calculation on the retail price. In terms of Zakat calculation, the goods are simply seen as another manifestation of a persons savings. For instance, if a shop owner was to sell all his stock on one day he would take home £5000. If Zakat was due the following day, all £5000 would be subject to Zakat. Though only a certain percentage was profit, Zakat is due on the total sum as the total represents the amount of monetary assets the shop owner had, except that the cash was in the form of trading inventory.

Zakat on Debts Owed

For someone's wealth to be subject to Zakat, they must have full ownership over it. Hence, being the owner of the wealth, it is the creditor who is required to pay Zakat for the loan and not the debtor. Likewise, if a person is burdened by debts that exceed the Nisab or reduce the assets' worth to below the Nisab, Zakat would not be obligatory. In fact, such a person in financial difficulty may become a recipient of zakah funds.

Zakat Fatwa

My son has a major gambling problem and is in serious debt.

Can I help him with Zakat money?

We would advise you to continue to support your son with good advice, dua, and even financial assistance if you feel that this is in his best interest.

As for the issue of Zakat, then it must be looked at from a different perspective. The Zakat money that is due on your wealth can only be given to certain people who qualify for it. In fact, as soon as your Zakat is due, those people are now rightful claimants to that money- in the eyes of Allah, and you are obliged to give that money to them. As for your family and those dependent on you for financial help, then you are always obliged to spend upon them from whatever wealth you have, this is their right over you. So we should be clear that their are two different types of people you are obliged to spend on: your family and those dependant on you & the Zakat recipients. Your family cannot be deprived of your money at the expense of the Zakat recipients, nor can the Zakat recipients be deprived at the expense of your family; each should be taken care of separately as two separate obligations.

To conclude, you cannot give your son your Zakat proceeds to help him out, but you should continue to support him financially if that is in his best interests and not feeding his gambling addiction.

Unfortunately, due to the prohibited nature by which your son fell into debt, he cannot accept Zakat money from any person.

From the Debtors Perspective

From the Creditors Perspective

As a general rule, when performing the Zakat calculation, all debts that are pending payment in the near future should be subtracted from ones savings. Zakat is then due if the remainder still meets the Nisab. Uthman ibn Affan would instruct the people to do this by saying, ‘This is the month of your Zakat. Those of you who have debts should pay them back so you can start paying Zakat on the (remaining) assets.'

The Shari'a encouraged the paying off of one's immediate debts in this way by exempting them from the Zakat calculation. As for deferred debts -debts due over a several years- they are not deductible from ones Zakat calculation. One of the common deferred debts is the mortgage of the home. If such long term debts were deductible, most of the wealthy people in the world would be exempt from paying Zakat and the poor would suffer greatly. In cases of deferred debts, only the immediate installments due that year should be deducted as they are akin to immediate debts that are deductible.

Good Debt

The general position is that Zakat is payable by the creditor where repayment is likely to be made or where it has been guaranteed by a third party. Thus, were a loan is likely to be paid back, this amount owed is akin to being in a savings account of the owner and so it should be included in one's annual Zakat calculation.

Bad Debt

Zakat is not due on a debt owed by one who is in difficulty or one who is taking too long to pay or the one who denies that he owes anything, or wealth that has been taken by force, stolen or lost, or wealth that has been buried and its location forgotten or wealth when it is not known who has it.

If the creditors manages to secure repayment, zakah of one year would be owed.

Islam as a way of life legislates for human life without disregarding the fact that human beings sin, make mistakes, have feuds and disputes, and run into financial difficulties. It is for this reason that Zakat was legislated to elevate the spirit of those in need; to empower them to think beyond their

material needs, and to provide a perpetual means of purification and cleansing for the more fortunate in society.

Although the collection of Zakat is discussed in both the Qur'an and in Prophetic Narrations, where it can be spent was specifically mentioned in one verse of the Qur'an: collected Sadaqah are [meant] only for the poor and the needy, and those who are in charge of collecting, and those whose hearts are to be won over, and for the freeing of human beings from bondage, and [for] those who are over burdened with debts, and for God's cause, and [for] the wayfarer: [this is] an ordinance from God - and God is all-knowing, wise.

A glance at the categories of people to whom Zakat is distributed immediately reveals the social aspect of Zakat, such as providing an ethical model for Social Insurance. Aside from the social objectives, there are other purposes Zakat serves; some of which relate to the state and public order.

The significance of Zakat as a pillar of Islam can be seen by the fact that its distribution was not left to the rulers or those with personal opinions to decide according to their whims. It was explicitly detailed by Allah, Himself, into eight distinct categories.

The Poor and the Needy
The poor and the needy are the first two categories of people deserving of Zakat. This highlights the fact that the primary aim of Zakat is to eliminate poverty and destitution from society. According to the majority of jurists, the poor and needy are defined with regards to how well they can secure their basic needs. A poor person would be one whose income is far from satisfying his or her day-to-day basic living costs, while a needy person is one whose wealth and income fall just short of that.

In our times, a ‘needy' person would be someone with a large family living in a one bedroom flat. His income only covers the costs of living for three out of every four weeks. Such as person is in a constant struggle to keep up with the basic costs of living. As for a 'poor' person, they would perhaps only be found in third world countries where absolute poverty is rife.

How much should be given?

No fixed amount was ever determined by jurists as the aim of giving Zakat to this category is to provide an adequate level of living and to help Muslims stay above the poverty line. Traditionally jurist would mention such considerations such as food, clothing, and shelter. In contemporary terms, needs such as education and healthcare may also be added.

Workers in Zakat AdministrationWorkers in the collection and distribution of Zakat are the third category of Zakat recipients. These administrators are to be paid a due because of their work, even if they are well-off; at a rate proportional to current market value of similar administrative work.

The very of this category emphasises the autonomy with which the Zakat institute operates. The workers in Zakat admin were also made recipients in order to avoid any attempt on their part to impose additional duties on zakat payers for their own beneﬁt

Does this category exist today?

Jurists have always maintained that it is the duty of the Islamic state to appoint collectors and distributors of Zakat. When no such state or leader exist, a whole plethora of problems arise whereby individuals can come together and setup their own organisation to carry out the task of collecting and distributing Zakat, effectively making themselves recipients of Zakat proceeds. This, of course leads to an issue of conflict of interest.

These problems need to be addressed as the Zakat proceeds are the right of certain people who qualify for it and if a portion of it is given elsewhere, then in reality an eligible person has been robbed of Zakat!

The question arises as to who exactly appointed the organisations to collect the Zakat on behalf of the local people? Are they acting as agents who distribute or working as a Zakat institution? Only in the latter case are they allowed to take from the Zakat proceeds. As for an agent, he can only take a fee for distribution from the person whom he is working for and not a portion of their Zakat proceeds.

There is a fine line between operating as an agent and being an actual Zakat collector who is entitled to a portion of the Zakat proceeds.

Best practice would be to avoid taking admin fees for Zakat distribution; especially when the organisation has many other functions and roles. Muslim charities would do themselves a great service by exercising extra scrupulousness in handling Zakat proceeds.

Those Whose Hearts are Being ReconciledThis category of recipients refers to Muslims who have just embraced Islam, to whom giving, will help them to be steadfast and not apostate. We often find that people who embrace Islam have to make several sacrifices and may be persecuted, ostracised, or even threatened financially by the communities in which they live. Such a person is undoubtedly in need of support and encouragement and can receive Zakat under the category 'Those Whose Hearts are Being Reconciled'.

It can also refer to non-Muslim individuals whose evil can be forestalled or who can benefit and defend Muslims. The state would ultimately be in charge of the decision-making process in determining those that qualify for such financial support.

Another group within this category are individuals who are close to becoming Muslim or whose clan may become Muslim; like Safwan ibn Umayya, who was granted safety by the Prophet the day of the Muslim conquest of Makkah. The Prophet gave him so many camels loaded with goods that he exclaimed, "this is the giving of one who fears no poverty". He would later say that his intense hatred for the Prophet turned into immense love due to his generosity. Safwan became a committed Muslim.

Ultimately the loftiest goal a Muslims community can have is to save their non-Muslim neighbours from the evil ending that comes from disbelief in Allah, the All-Mighty. The reality on the ground is that some people are swayed by financial incentives and Islam legislates for real life.

Emancipation of RaqeeqIslam was the first system to begin the gradual abolition of slavery though a combination of tight regulation of the sources of slavery, such as prohibiting the enslavement of debtors, and by establishing a continual process of freeing slaves. The Shari'ah encourages the freeing of slaves and views it as an act of submission to Allah, as well as an act of restitution performed by persons seeking forgiveness for sins or errors, such as breaking the fast in Ramadan or breaking an oath.

In the Qur'an, slave masters are ordered to contract their slaves freedom against an agreed sum, with the Muslim community called upon to help contracted slaves to pay off these agreed amounts. Allah says, "If any slaves you own desire to make a contract to free themselves, write it for them if you know of good in them and give them some of the wealth Allah has given you".

In addition, Allah made the emancipation of slaves one of the eight objectives of Zakat. Proceeds from Zakat can either be used to help a contracted slave (Mukatab) pay off his master, or to buy the slave outright.

Freeing Muslim Prisoners Of War

Included in this category of Zakat recipients are Muslim prisoners of war who fallen into the hands of the enemies of the Islamic state, on the grounds that both cases gain the freedom of Muslims.

Many contemporary scholars agree on this, with some stating that money should be given as charity to free Muslim prisoners of war and one should not wait for the zakat collection to take place. This is because freeing them is an obligation that requires immediate attention.

Today in Palestine there are more than 10,000 Muslims that have been imprisoned by the israelis, with some of them having been in captivity for nearly thirty years. Imam Malik has a famous fatwa stating that it is obligatory to use the wealth of the Muslims to free the Muslim captives even if it means emptying the treasury! Umar ibn Abdil Aziz would implement such a policy when freeing Muslim prisoners from the Romans in his era. Ibn Taymiyyah says that it is from the most righteous of deeds to fee the prisoners of war.

People in DebtStatistics today reveal that the most common concern for people is not sickness, terrorism, or the state of the economy but rather their debts and managing them. People in debt form the sixth category of those entitled to zakat proceeds.

The Hanafi school, this category refers to those who do not own the nisab above what is needed to pay their debts. Hence a person in debt will only be eligible for zakat if they continually pay off the debt until they themselves fall below the nisab. On the other hand, Malik, ash-Shafi'ee and Ahmed distinguish between two types of debtors: those whose debts are for personal reasons, such as those incurred due to consumer expenditure, including marriage, medical bills, building a house for personal residence etc, and those whose debts are caused by making reconciliation between two disputing parties.

Those in debt for personal reasons

Moving away from the difference of opinion we see that the jurists of the past specified the types of debts that would make a debtor eligible for Zakat. It was not the case that simply being in debt would warrant financial aid in the form of zakat proceeds, as some contemporaries have mistakenly called for.

In summary, the person in debt should payoff their loans, even if it meant selling off some of their assets, until they reach a financial state whereby they are left with no surplus cash after taking care of their essential needs; such as family maintenance, rent, shopping etc, at which point he can be given zakat proceeds to pay off the rest of the debt. This makes sense as if such a person paid off more of their loan they would reach a financially stricken state such that he would be entitled to zakat as a ‘poor' person. And the spirit of zakat is to bring people out of poverty.

Those in debt for social reasons

The second type of debts are those incurred when trying to reconcile between two people who have a dispute. It is for those who undertake activities for public interest such as overseeing the reconciliation of disputes among groups and individuals, often by paying compensation and ransom from their own assets.

The incorporation of this category into the Islamic economical model is a clear indication of its amazingly ethical and pragmatic approach in dealing with cases of animosity and argumentation that often occurs between two parties and it is known to be practiced today in certain places. Such a person is allowed, unanimously, to take from zakat proceeds to deal with the debts incurred in reconciling.

For the Cause of Allah (Fee Sabeeli'llah)The seventh category of zakat distribution is expressed in the Qur'an as fi sabeeli'llah ["In the Way of Allah"]. To whom is this share of zakat to be paid?

Linguistically, the term fi sabeelillah is commonly understood to mean fighting for the sake of Allah, since frequent usage almost restricts the meaning to fighting for the sake of Allah. However, the term sabeelillah is a more general term including any act intended solely to please Allah.

It is undisputed that the term fi sabeelillah in the ayah of surah at-Tawbah outlining the recipients of zakat applies to fighting for the sake of Allah. The prophet spoke emphatically about the term fi sabeelillah in such a way when he said "He who fights to make the word of Allah supreme is fighting for the sake of Allah". However, the differences centre on whether this category also includes other good actions intended to please Allah. According to these scholars it would refer to everything that is done seeking the Countenance of Allah, such as building mosques, repairing roads, building schools, printing books, and other deeds that are done to draw closer to Allah.

The rationale behind the legislation that zakat money be given towards fighting for the cause of Allah is simply based on the fact that the enemies of Allah expend money and effort to bar people from the Deen of Allah, hence it is a duty upon the believers to spend money in order to counter this and remove such obstacles.

The general meaning, as asserted by some contemporary scholars, that the zakat category fi sabeelillah includes all good acts devoted to Allah is not suitable to the ayah in at-Tawba. The verse lists specific categories entitled to zakat; this ayah is exclusive because it reads, "Sadaqat is only for…" as is the hadith of the prophet (saw), "Indeed Allah gives His ruling on zakat, and divides it into eight parts...".

Moreover, the general meaning would in fact include the previous seven groups in the ayah. Why then does Allah enumerate the other seven? The glorious words of Allah are devoid of useless repetition or redundancy. So there must be a distinct meaning for the category of 'in the cause of Allah'.

Those who support the general meaning rely on the original linguistic meaning of the term sabeelillah. However, Muslim jurists (including all four schools of thought) and Qur'an commentators have for centuries understood the term fi sabeelillah to mean Jihad (fighting for His cause) as as supporting fighting.

Is equipment and arms included?

The four schools agree on fighters being given zakat but spending zakat proceeds of equipment and arms is not agreed upon.

It should be noted that the type of fighters who qualify for zakat are those living very close to the nisab and if they were asked to undertake jihad it may result in them becoming ‘poor'; others state that if the fighter has to borrow money to undertake jihad then he too can take from the zakat.

According to the majority of scholars the murtaziq, mercenary fighters, can also be paid off using zakat proceeds.

Likewise many scholars opine that zakat proceeds can also be given to the fighters family if needs be.

There is a great deal of differing regarding whether or not buying equipment for jihad is included under the term fi sabeelillah.

Travellers StrickenThe Glorious Qur'an mentions travellers eight times in the context of encouraging kindness towards them. Verses such as, "Give relatives their due, and the very poor and travellers but do not squander what you have", were revealed early on, when the Prophet was living in Makkah with a handful of followers. From this perspective, meaningful travel, such as traveling to seek knowledge or mediate over the signs of Allah, has always been encouraged in Islam. This kind of financial aid was legislated in a time when there were no hotels, restaurants, or service stations for travellers.

Later on in Madinah, travelers who became financially stricken whilst on travel, were made recipients for zakat proceeds.

Conditions for payment

The first condition is that the traveller must be in need when on the road, since the primary purpose of zakat is to help travellers reach their homes. If he has the means of reaching home, no payment can be made.

The second condition is that the journey must not be in disobedience to Allah. This exclusion means that those who travel for sinful purposes or traders whose commodities are forbidden must not be given zakat, except if their lives are at stake. The purpose of this condition is obviously to refrain from helping wrongdoers.

Some scholars also stipulate that the traveller must not be able to borrow his way out of trouble. As mentioned by the Hanafi scholars, it would be recommended to first seek to take a loan out from someone before turning to the zakat institutions for financial aid. In any case, if zakat proceeds are due, enough money would be given to suffice the journey back home or a place where the traveller has access to funds.

The poor and the needy are the first two categories of people deserving of Zakat. This highlights the fact that the primary aim of Zakat is to eliminate poverty and destitution from society. According to the majority of jurists, the poor and needy are defined with regards to how well they can secure their basic needs. A poor person would be one whose income is far from satisfying his or her day-to-day basic living costs, while a needy person is one whose wealth and income fall just short of that.

In our times, a ‘needy' person would be someone with a large family living in a one bedroom flat. His income only covers the costs of living for three out of every four weeks. Such as person is in a constant struggle to keep up with the basic costs of living. As for a ‘poor' person, they would perhaps only be found in third world countries where absolute poverty is rife.

How much should be given?

No fixed amount was ever determined by jurists as the aim of giving Zakat to this category is to provide an adequate level of living and to help Muslims stay above the poverty line. Traditionally jurist would mention such considerations such as food, clothing, and shelter. In contemporary terms, needs such as education and healthcare may also be added.

Workers in the collection and distribution of Zakat are the third category of Zakat recipients. These administrators are to be paid a due because of their work, even if they are well-off; at a rate proportional to current market value of similar administrative work.

Point of Wisdom

The very of this category emphasises the autonomy with which the Zakat institute operates. The workers in Zakat admin were also made recipients in order to avoid any attempt on their part to impose additional duties on zakat payers for their own beneﬁt

Does this category exist today?

Jurists have always maintained that it is the duty of the Islamic state to appoint collectors and distributors of Zakat. When no such state or leader exist, a whole plethora of problems arise whereby individuals can come together and setup their own organisation to carry out the task of collecting and distributing Zakat, effectively making themselves recipients of Zakat proceeds. This, of course leads to an issue of conflict of interest.

These problems need to be addressed as the Zakat proceeds are the right of certain people who qualify for it and if a portion of it is given elsewhere, then in reality an eligible person has been robbed of Zakat!

The question arises as to who exactly appointed the organisations to collect the Zakat on behalf of the local people? Are they acting as agents who distribute or working as a Zakat institution? Only in the latter case are they allowed to take from the Zakat proceeds. As for an agent, he can only take a fee for distribution from the person whom he is working for and not a portion of their Zakat proceeds.

There is a fine line between operating as an agent and being an actual Zakat collector who is entitled to a portion of the Zakat proceeds.

Best practice would be to avoid taking admin fees for Zakat distribution; especially when the organisation has many other functions and roles. Muslim charities would do themselves a great service by exercising extra scrupulousness in handling Zakat proceeds.

This category of recipients refers to Muslims who have just embraced Islam, to whom giving, will help them to be steadfast and not apostate. We often find that people who embrace Islam have to make several sacrifices and may be persecuted, ostracised, or even threatened financially by the communities in which they live. Such a person is undoubtedly in need of support and encouragement and can receive Zakat under the category 'Those Whose Hearts are Being Reconciled'.

It can also refer to non-Muslim individuals whose evil can be forestalled or who can benefit and defend Muslims. The state would ultimately be in charge of the decision-making process in determining those that qualify for such financial support.

Another group within this category are individuals who are close to becoming Muslim or whose clan may become Muslim; like Safwan ibn Umayya, who was granted safety by the Prophet the day of the Muslim conquest of Makkah. The Prophet gave him so many camels loaded with goods that he exclaimed, "this is the giving of one who fears no poverty". He would later say that his intense hatred for the Prophet turned into immense love due to his generosity. Safwan became a committed Muslim.

The absence of a single Islamic authority in many non-Muslim countries makes it extremely difficult to decide who exactly falls under this category. Moreover, distributing Zakat proceeds ought to be the job of the head of the Islamic state. Hence, it would be safer for one to avoid giving Zakat to people who may fall into this category and instead give to the ‘poor and needy' who can easily be identified and catered for.

Raqeeq is an Arabic term that refers to those who lost their freedom because they were taken as prisoners of war by the Muslim armies. In some cases, part of their offspring will inherit their state of limited freedom and this is the Islamic model for prisoners of war.

It is often wrongly translated as slaves as they have limited freedom. The Qur'an would refer to them occasionally as ‘what the right hand possess' or ‘raqabah'.

Different systems apply different rules to such people and hence different titles are given to them. Despite the approval of Islam that such people exist, Islam is keen to secure full freedom for every single human being. The Shari'a encourages reinstating the full freedom for this category and considers it as an act of submission to Allah, as well as an act of restitution performed by persons seeking forgiveness for sins or errors, such as breaking the fast in Ramadan or breaking an oath. It also allowed to give from the Zakat proceeds to achieve this for Muslim raqeeq.

Statistics today reveal that the most common concern for people is not sickness, terrorism, or the state of the economy, but rather their debts and managing them. People in debt form the sixth category of those entitled to Zakat proceeds.

According to the Hanafi school, this category refers to those who do not own the Nisab above what is needed to pay their debts. Hence a person in debt will only be eligible for Zakat if they continually pay off the debt until they themselves fall below the Nisab. On the other hand, Malik, ash-Shafi'ee and Ahmed distinguish between two types of debtors: those whose debts are for personal reasons, such as those incurred due to consumer expenditure, including marriage, medical bills, building a house for personal residence etc, and those whose debts are caused by making reconciliation between two disputing parties.

Those in debt for personal reasons

Moving away from the difference of opinion we see that the jurists of the past specified the types of debts that would make a debtor eligible for Zakat. It was not the case that simply being in debt would warrant financial aid in the form of Zakat proceeds, as some contemporaries have mistakenly called for.

In summary, the person in debt should pay off their loans, even if it meant selling off some of their assets, until they reach a financial state whereby they are left with no surplus cash after taking care of their essential needs; such as family maintenance, rent, shopping etc, at which point he can be given Zakat proceeds to pay off the rest of the debt. This makes sense, as if such a person paid off more of their loan they would reach a financially stricken state such that they would be entitled to Zakat as a ‘poor' person. And the spirit of Zakat is to bring people out of poverty.

Those in debt for social reasons

The second type of debts is those incurred when trying to reconcile between two people who have a dispute. It is for those who undertake activities for public interest such as overseeing the reconciliation of disputes among groups and individuals, often by paying compensation and ransom from their own assets.

The incorporation of this category into the Islamic economical model is a clear indication of its amazingly ethical and pragmatic approach in dealing with cases of animosity and argumentation that often occurs between two parties and it is known to be practiced today in certain places. Such a person is allowed, unanimously, to take from Zakat proceeds to deal with the debts incurred in reconciling.

The seventh category of Zakat distribution is expressed in the Qur'an as fi sabeeli'llah ["In the Way of Allah"]. To whom is this share of Zakat to be paid?

Linguistically, the term fi sabeeli'llah is commonly understood to mean fighting for the sake of Allah, since frequent usage almost restricts the meaning to fighting for the sake of Allah. However, the term sabeelillah is a more general term including any act intended solely to please Allah.

It is undisputed that the term fi sabeeli'llah in the ayah of surah at-Tawbah outlining the recipients of Zakat applies to fighting for the sake of Allah. The prophet spoke emphatically about the term fi sabeeli'llah in such a way when he said "He who fights to make the word of Allah supreme is fighting for the sake of Allah".

The rationale behind the legislation that Zakat money is given towards fighting for the cause of Allah is simply based on the fact that the enemies of Allah expend money and effort to bar people from the deen of Allah, hence it is a duty upon the believers to spend money in order to counter this and remove such obstacles.

Some contemporary scholars wonder whether this category also includes other good actions intended to please Allah. According to these scholars it would refer to everything that is done seeking the Countenance of Allah, such as building mosques, repairing roads, building schools, printing books, and other deeds that are done to draw closer to Allah.

However, it can be argued that including all good acts devoted to Allah in the meaning of fi sabeeli'llah is not suitable to the ayah in at-Tawba as the verse lists specific categories entitled to Zakat; this ayah is exclusive because it reads, "Sadaqat is only for…" and the Hadith of the prophet SAW, "Indeed Allah gives His ruling on Zakat, and divides it into eight parts...".

Moreover, the general meaning of fi sabeeli'llah would in fact include the previous seven groups in the ayah. Why then does Allah enumerate the other seven? The glorious words of Allah are devoid of useless repetition or redundancy. So there must be a distinct meaning for the category of ‘in the cause of Allah'.

Those who support the general meaning rely on the original linguistic meaning of the term sabeelillah. However, Muslim jurists (including all four schools of thought) and Qur'an commentators have for centuries understood the term fi sabeeli'llah to mean Jihad (fighting for His cause) as supporting fighting.

Is equipment and arms included?The four schools agree on fighters being given Zakat but spending Zakat proceeds for equipment and arms is not agreed upon.

It should be noted that the type of fighters who qualify for Zakat are those living very close to the Nisab and if they were asked to undertake jihad it may result in them becoming ‘poor'; others state that if the fighter has to borrow money to undertake jihad then he too can take from the Zakat.

According to the majority of scholars the murtaziq, mercenary fighters, can also be paid off using Zakat proceeds. Likewise many scholars opine that Zakat proceeds can also be given to the fighter's family if needs be. However, until this day there is a great deal of differing regarding whether or not buying equipment for jihad is included under the term fi sabeeli'llah.

The Glorious Qur'an mentions travellers eight times in the context of encouraging kindness towards them. Verses such as, "Give relatives their due, and the very poor and travellers but do not squander what you have", were revealed early on, when the Prophet was living in Makkah with a handful of followers. From this perspective, meaningful travel, such as traveling to seek knowledge or mediate over the signs of Allah, has always been encouraged in Islam. This kind of financial aid was legislated in a time when there were no hotels, restaurants, or service stations for travellers.

Later on in Madinah, travellers who became financially stricken whilst on travel, were made recipients for Zakat proceeds.

Conditions for paymentThe first condition is that the traveller must be in need when on the road; since the primary purpose of Zakat is to help travellers reach their homes. If he has the means of reaching home, no payment can be made.

The second condition is that the journey must not be in disobedience to Allah. This exclusion means that those who travel for sinful purposes or traders whose commodities are forbidden must not be given Zakat, except if their lives are at stake. The purpose of this condition is obviously to refrain from helping wrongdoers.

Some scholars also stipulate that the traveller must not be able to borrow his way out of trouble. As mentioned by the Hanafi scholars, it would be recommended to first seek to take a loan out from someone before turning to the Zakat institutions for financial aid. In any case, if Zakat proceeds are due, enough money would be given to suffice the journey back home or a place where the traveller has access to funds.

Glossary

Any item of economic value owned by an individual or corporation, especially that which could be converted to cash.

Capital

Cash or goods used to generate income either by investing in a business or a different income property.

Fiat money

Money which has no intrinsic value and cannot be redeemed for specie or any commodity, but is made legal tender through government decree. All modern paper currencies are fiat money, as are most modern coins.

Fiqh

The science of knowing the details of the rulings of the Shari'ah.

Hadith

Sayings attributed to the Prophet SAW.

Hawl

The passing of one lunar year whilst in possession of nisab.

Hijri

Denoting the Islamic calendar year.

Ijma'

Unanimity, an agreement among all scholars on a certain ruling.

Imam

A leader in his field or leader of the Muslim state market value - the sale price on an open market e.g. the current retail price for an iPhone.

Monetary assets

Cash savings or assets that can be readily converted into cash.

nisab

A minimum amount which determines if a person's wealth is subject to zakat.